TAXATION PLANNING Essay Example

Taxation Planning

Taxation Planning

Q1. Should the property be purchased in the name of a family company or trust or be acquired in the personal name of Jason? Discuss

Jason should purchase the property in his own name since based on the net worth that he has, this kind of investment and purchase is sustainable and feasible. The largest saving that makes the economic sense for this purchase most of which he inherited from his grandfather is already in his own name which means that there is no point having the property as that does not provide any further financial cushion in support of his purchasing decision (McKeown, Kerry & Olynyk, 2014). In addition to this, the loan that Jason plans to get is based on his personal financial strength and does not require his family’s assets.

Q2. Discuss the likely tax treatment of the painting expenditure and the installation of the carport in respect of the property purchase

The painting expenditure and the installation of the carport costs in respect of the property purchase are not deductible since they are directly incurred in the production of the income. This is so because these costs add value to the property which then can be the basis for increased revenue collection from the property when leased out (McKeown, Kerry & Olynyk, 2014). In the same way, in the event that Jason finds the painting of the property not good enough and requires it to be repainted, if he does that from his own costs as is the case, then he qualifies to require tax reduction from the property cost prior to the purchase of the property or in the course of the payment of the property depending on the prior agreement entered into (McKeown, Kerry & Olynyk, 2014).

Q3. Based on the above information, calculate the net tax payable by Jason for the year

Accumulation of tax payment through the year:

Property rates — $600

Tax agents — $600

FBT payable on the car benefit sacrifice — $5000

Tax on annual salary – 0.3 x $65000 = $216666.67

Total Tax payable in that year is = $222866.67

Q4. What would be the tax implications if Jason was to move into the property after six years and use it as his principal residence? Would there be any tax implications upon a future sale?

After six years, should Jason move in the property to be his principal residence there would be no further tax implications other than the payment of the loan he took towards the purchase of the property which was to run for 20 years (Australian Government Treasury, 2011). In the event that he chooses to sale the property later on, the tax implications would be rates for the property and insurance.

Q5. Jason advises that he loves sailing and he owns a small yacht. During the year, he bought 2 run-down yachts, fully renovated them and sold them for a combined profit of $10000. Jason wants to know whether the $10000 needs to be included in his assessable income for the year.

The $10000 profit sale from his business is a one-time investment that yielded good profits for his income and therefore needs to be included in his assessable income for the year. This however has to be indicated that it is a one-time profit so that it does not appear as a recurrent income on his assessable income. The other reason that is should be added to his assessable income is that it is an amount that can be vouched for and assessed as a viable investment and business revenue even though it is a one-time revenue channel.

References

Australian Government Treasury. (2011). “Reforms to car Fringe Benefits tax Rules”. Joint Media Release, No. 76, Treasury.gov.au.

McKeown, W., Kerry, M. & Olynyk, M. (2014). Financial Planning. 2nd edn. New York: John Wiley & Sons Australia Ltd.